>From the Hettinga-lists. I disagree with some of the author's conclusions, since he apparently hasn't noticed that e-gold exists, but it's an interesting read anyway. JMR
Subject: How Penny Per Page Might Work From: "R. A. Hettinga" <[EMAIL PROTECTED]> Date: Thu, 15 Nov 2001 14:55:15 -0500 http://www.howstuffworks.com/penny-per-page.htm How Penny Per Page Might Work by Marshall Brain The Web is an amazing and remarkable phenomena that has changed the way we think about information, publishing, commerce and computers. Most importantly, the Web has had a huge effect on every individual's ability to distribute information to the world. Prior to the Web, there really was no way for an individual to reach a worldwide audience. Today, with the Web, worldwide publishing is simple and instantaneous. Anyone with a computer can publish anything they want, and the entire world can see it a few seconds later. There is tremendous creativity and thousands of new ideas. The possibilities for content and services that the Web can offer seem endless. While it is extremely easy for any individual or business to publish material on today's Web, one thing is currently missing -- there is no easy way to make money from those Web sites. Three years ago, there were two schools of thought on Web business models: * Web sites could pull in advertising dollars like TV and radio networks can, making significant amounts of money off of advertising. * Web sites could sell products electronically -- eCommerce. It turns out that neither of these models works very well on the Web. It is fairly easy to see why today, but in 1998 it was hard to imagine that these models would not work. Today, there are very few good business models that work on the Web, and this deficit has a significant effect. The Web is becoming somewhat like a desert. There are some survivors -- Ebay, Yahoo, Amazon and so on -- but nothing new is germinating in any significant way. Feedback If you have comments or suggestions about the penny per page idea, please send them to [EMAIL PROTECTED] The problem is that this desert environment leaves much of the promise of the Web untapped. Without business models that work, there is no way for the Web to reach anything near its full potential. Here is one very simple example. Go to any bookstore today and you can find hundreds of thousands of titles available, all of them published on paper. It would be extremely useful to have all of this information available in an electronic form on the Web, but none of these titles are currently on the Web because there is no way to make money from them. We are locked into paper publishing right now because of the lack of a good Web business model. What if it were possible to change things? What if we created a business model for the Web that worked? In other words, what if we could find an easy general way for Web sites to get paid for their content and services? If we could figure that out, new Web sites would surge from the desert floor like an explosion. We would have millions of Web sites producing every sort of content and electronic service that you can imagine. There would also be millions of jobs created in an electronic economy that we only see the barest outline of today. In this edition of HowStuffWorks, we will discuss the "penny per page" idea, a potential business model for the Web that would allow Web sites to receive direct payment for their content. This idea is being published here so that people in the Web Community can see the current problem, see the effects it is having, and discuss possible solutions. The "penny per page" idea described in this article is one easy solution that would have a gigantic positive effect on the Web -- it would transform the Web and change the lives of many people in just a few years. However, even if this idea is never adopted, the discussion will be extremely productive. The Challenge Facing the Web How can we build a successful electronic economy on the Web? Originally it was thought that advertising would support free Web sites in the same way that advertising supports free TV stations and free radio stations. Almost all commercial Web sites therefore adopted the "free content with paid advertising" model. Unfortunately, this business model ended up being completely wrong for the Web, and a huge number of sites went out of business by using this model. The reason that advertising does not work on the Web is because the Web is nothing like TV or radio. TV and radio are linear, and with a linear medium you can force the viewer/listener to pay attention to an ad that interrupts the program. The Web is nothing like that. Instead, the Web is much more like a book or a magazine. People come to the Web primarily to read and see pictures, and they can flip to a new page or to a completely different site whenever they feel like it. When you go to the book store, you never see free books. It is also very rare to find books containing advertising. Instead, people pay directly for the information that books contain because the information is valuable to them. The challenge facing the Web today is that the Web is using the wrong business model. The Web needs to adopt a new business model in order to be successful -- in order to reach its full potential. The Web's revenue model needs to involve payment like the book revenue model, but it also needs to accomodate the completely infinite and fluid nature of the Web. A Penny Per Page The proposed mechanism for creating an easy, sustainable revenue model for all Web sites has a very simple name: It's called a penny per page. Here's how it would work. Let's say you go to Google to do a search, or to CNN to read about Afghanistan, or to Amazon to buy a book. Whenever a person looks at any Web page, that viewer will pay a penny. The Web site will receive the penny. It is that simple. With a penny per page, in five years we would see incredible changes. Here are three examples: Example 1: A search engine Google.com gets about 100 million page impressions per day right now. With a penny per page, Google would make $1 million a day, or something like $350 million per year. Feedback If you have comments or suggestions about the penny per page idea, please send them to [EMAIL PROTECTED] Would $350 million per year make a difference to Google? From a business standpoint, it obviously would. But think about it from a development standpoint. Google is arguably the best search engine out there right now, but it is only scratching the surface of what a search engine could be. Imagine what Google could become if the site could afford to spend $200 million per year on new software development. In five years, Google's capabilities (or those of a competitor) would be breathtaking. Without a penny per page, Google will still improve, but at a dramatically slower pace. There needs to be money to support the development of new features, and right now the money is not there in any significant way. So it's a trade-off: "Free" is probably one of the most beloved words in the English language; but by not paying Google when we use it, we're effectively denying ourselves the increased benefits that our payments would bring about. Example 2: Any content Web site Imagine what a penny per page would do to: * CNN (or any other "news" site) * The New York Times (or any other site associated with a newspaper or TV network) * ESPN (or any other sports property) * Britannica (or any other "reference" site) * Salon (or any other magazine site) * The Motley Fool (or any other financial site) * NASA (or any other government site providing tons of content) The list is endless. All of these sites would receive significant revenue from a penny per page. They could then produce immense amounts of content at a breathtaking pace and have a financial incentive to keep producing more and more. Millions more content sites would start springing up like weeds, and they would all be hiring people. The effect that Web revenue would have on the economy, and on the types and amount of content posted to the Web, would be significant. Example 3: Any Expert Imagine a person who has an area of expertise. The person might know anything, from financial analysis to model railroad landscape design to electric guitar repair -- it doesn't really matter. Right now, the person has two options: * the person can write a book, take it to a publisher and publish it. The person will make a royalty of approximately 10% of the book's wholesale price. * the person can publish the information on the Web and make nothing. Neither of these options works very well for the person with the expertise. Writing a book involves a tremendous amount of work, and there is no guarantee that a publisher will accept it. The publisher also takes 90% of the revenue*. Publishing on the Web does not require a publisher, and also allows incremental publishing -- the expert can write and publish a little bit every day. But the expert makes nothing for his/her effort. With a penny per page, millions of people around the world would be able to publish information AND make money. Conventional publishers would also have a reason to bring existing books over to the Web. The pool of information on the Web will explode. [* A very common question -- why does the author of a book get only 10%? It is not because publishers are "evil" or "greedy", but instead because of the way book publishing works. To edit, lay out, print (thousands of copies), warehouse, market and distribute a book, the minimum amount a publisher will spend is approximately $100,000. Many books cost much more than that to arrive on the bookstore shelf. That is a very steep cost of entry per title. Out of every 10 books published, as a general rule, less than half are able to dig themselves out of the $100,000 hole. The publisher eats all of those costs and still pays royalties, in the hope that several books out of every 10 will make a profit. After all of the costs are taken into account, all that's left is about 10% to pay to the authors and still maintain a profitable publishing business.] Resonance There are many, many Web sites that started out as a hobby and then made it big. What made them big is a process called resonance. When a Web site resonates, it can grow a very large audience very quickly. Resonance comes from normal human behavior. People tend to do two things when they find a Web site they like: They tend to come back, and they tend to tell their friends. The retention and expansion of audience is resonance. Napster, of course, is the poster child for resonance. When people found Napster there was a huge probability that they'd come back, and a huge probability that they'd tell their friends and that their friends would come back. So Napster went from zero to 50 million visitors per month in something like six months. The Web allows any individual or business on the planet to create a Web site and reach a worldwide audience. Anyone can create something, upload it to the Web, and the entire world can see it. Any 10-year-old can learn the technology, and anyone with a computer has the tools, so there is no barrier to entry. At no time in the history of the world has there been this sort of freedom of speech or this sort of worldwide voice for this many individuals. The access and potential is virtually unlimited; resonance then picks the winners. The Web allows true individual publishing and planet-spanning distribution. What is missing right now is any way for an individual or business to derive value from an innovative Web idea. With a penny per page, we would have a self-propagating combination of business and creativity: instant publishing with instant revenue for any individual who can access the Web. Under the penny-per-page model, millions of businesses and individuals can try millions of ideas, and if they are successful they will directly and immediately benefit. They do not have to seek venture capital. They do not have to experiment with and invent convoluted business models. They do not have to hire large sales forces to sell ads. What this means is that the richness and diversity of content and services on the Web will explode. In the process, individual people and businesses will, for the first time, be able to directly benefit from their work. A person with a great idea will be able to make a significant amount of money almost instantly because of resonance. Changing the Culture What will people think about the idea of paying a penny per page? Won't people complain about having to pay for the Web? Anyone who accesses the Web from home pays a monthly fee to an ISP for the privilege. An AOL account is typical, and it costs about $20 a month. MSN and Earthlink are about the same. People in the United States are already paying for the Web; but the Web sites -- the reason people log on in the first place -- get none of it. Will people complain about paying slightly more per month under the penny per page model? Right now people pay for cable TV, newspapers, magazines, telephone calls, directory assistance, video tapes, movie tickets, DVDs, pay-per-view, CDs, books, ring tones, 900 services, college courses... The fact that they don't pay for Web content is a historic anomaly. The benefits to be reaped by paying a very small amount of money for Web content are gigantic. Right now, people are actively denying themselves many of the most amazing things that the Web could provide because of the "totally free" World Wide Web. One of the reasons for choosing a simple approach like a penny per page is because it is such a small amount of money. If the "Give a Penny, Take a Penny" phenomenon is any indication, people don't seem to care about their pennies at all. Imagine what it would be like to actually get some value out of a penny. Here are four examples to illustrate the point: * If you are looking for information about portable defibrillators, is it worth a penny to get the 10 most relevant links from Google? * If you are thinking about buying a book, is it worth a penny for Amazon to let you see the opinions of 10 readers who bought the book you're interested in? * If you are doing a term paper on Afghanistan, is it worth a penny to go to Britannica to find out the history of the country? * If you need someone's phone number, or a map to someone's house, is it worth a penny to find it? These are ridiculous questions -- of course it is worth a penny. Right now you probably pay a dollar to get a person's phone number from directory assistance. A penny is an amazing bargain. It's also not going to add up to very much per month. People who log on to check stock prices, look up the weather, read the top news stories and so on might look at 25 or 50 pages a day. They would pay something between $5 and $15 per month for Web content. But let's also take the worst case scenario. Let's say that you sat in front of your computer 8 hours a day and looked at a new page every two minutes without interruption 20 days per month. That would cost $48 for the month. That is the worst case scenario, and it is unlikely anyone is going to do that. The cost will be minimal for just about everyone. Getting Started What is the best way to implement a penny per page? There are three possibilities: 1. Web sites manage it individually. 2. The ISPs manage it. 3. The Internet community manages it. The first possibility has been tried in myriad forms, and it does not work. When a Web site tries to unilaterally charge for its content, the audience almost always rejects it because everything else is free. Web sites will have to act in unison for a penny per page to work. Having the ISPs handle billing would probably be the easiest approach if the ISPs can create a common, fair and uniform model for all customers. The traditional way to get anything done on the Internet is for the Internet community, in the form of existing standards organizations, to create a standard which is then implemented on a non-profit basis. Alternatively, the top 1,000 or so Web sites, working in unison, could do it. Here's how it could be done: * The top 1,000 Web sites agree that everyone will switch over to a penny per page on a specific date under a unified system. The sites need to work together. If some sites switch and others don't, you will get the same problem that happens now when a site decides to unilaterally charge for its content. If there is not a uniform and super-simple billing model (so that users get one simple, easy-to-understand bill), the thing just won't work. * The community charters a new, non-profit corporation that will handle the flow of cash from the audience to the Web sites. This is the same sort of corporate model that today allows users to register domain names at a standard price. That corporation will be able to charge a handling fee on the penny that each page receives. That handling fee should be capped at something like five percent. * The non-profit corporation is open to every Web site, so that any site can sign up and get its money. The whole process needs to be incredibly simple -- something like the process that lets money flow to sellers at Ebay or Half.com. * Either that corporation handles billing, or billing flows through the customer's ISP, with the ISPs keeping a small handling fee to handle their costs. The key, and the reason for a separate, non-profit company in the middle, is to keep the process pristinely fair and unbiased. What makes the Web so strong now is the fact that it is a comletely level playing field. Anyone who can work a computer can get a domain name and start a Web site -- there's no social hierarchy on the Web. One of the main things that creates popular sites is resonance. In keeping with the populist sense of the Web, everyone ith a Web site should have equal access to the penny per page payment system. An unbiased system likethis with no middlemen would have huge benefits in terms of innovation. Q & A Is a penny per page the right amount? The penny per page approach is extremely easy for everyone to understand. A penny per page does not present a large barrier to the payer, and it pays a nice amount to the Web site. It could be argued that half a penny would work, and so would two pennies. The Internet community can play around with the numbers and decide, and it will likely end up somewhere very close to a penny. Is charging by the page impression the right unit? Why not charge by the byte? If you pick bytes, then you will see people bloating images and doing all sorts of other crazy things to inflate their pages. Won't Web sites chop up their content into a zillion pages if they get a penny per page? Probably not. Banner ads have already caused as much chopping as we will ever see. If sites chop things up too much, they won't resonate and they'll die out. Why should pricing be uniform? Shouldn't each site be able to set how much it charges per page? Maybe, but it complicates things. Say you are looking at a list of pages in Google and you want to click on one. Before you click on it, you have to remember to look closely to make sure that the Web site is not going to charge $100 per page instead of a penny per page. If it's a uniform pricing model, then you can click on any page without worrying about it, just like you do today. What do we do about streaming audio and video, and things like MP3 files? Streaming video is unique because it consumes significant bandwidth. A 10-minute streaming video at 300Kbps consumes upwards of 20 megabytes of bandwidth and might cost the Web site 10 to 20 cents to send it to the viewer. A pay-per-view model might be the right approach. Or maybe it's a dime per stream. With MP3 files, if artists automatically and directly received a dime every time someone downloaded one of their songs, it would create an unbelievable musical revolution. What would prevent a site from having a page that pops up 100 new pages when you land on it to ream the unsuspecting visitor out of a dollar? The billing mechanism should track for and eliminate charges for that, as well as for pages that auto-refresh themselves, error and non-existant pages, pages arrived at by pressing the back button, duplicate pages and so on. People in the U.S. tend to prefer a flat-rate model to a pay-per-unit model. Could there be a flat-rate model with penny per page? Probably the easiest way to implement a flat-rate model would be to create a cap. Let's say that the monthly cap were $20 per month. Everyone would know that if they looked at more than 2,000 pages per month, they would pay no more than $20 per month. If they looked at less than 2,000, they would pay only for the pages viewed. For people who hit the cap, the billing model would simply divide the $20 paid by the customer by the number of pages viewed and pay the sites whatever amount that turned out to be per page. Time for Change Feedback If you have comments or suggestions about the penny per page idea, please send them to [EMAIL PROTECTED] Imagine what the Web would be like if a penny per page had been woven into the Web's fabric from the very start. Our world, and the world's economy, would be completely different today. There would be millions of companies and individuals making significant amounts of money off of Web-based content and services. There would be thousands of times more content on the Web, and there would be the incentive to add more and more. But the biggest difference it would have made is in the number of new Web sites that would appear on the Web. Right now, the number of ideas being implemented is severely constrained because there is no way to make money off of most of them. The thing to keep in mind during the possible transition is this: Would it be worth a penny to you to look up a phone number you need? Would it be worth a penny to you to get a map to your destination? Would it be worth a penny to you to get the answer to a particular question? A penny is an incredible bargain. The fact that none of us is paying that penny right now is putting a huge damper on Web innovation. A penny per page will bring consistent revenue to the Web, and the change that it will bring will amaze all of us. -- ----------------- R. A. Hettinga <mailto: [EMAIL PROTECTED]> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' --- You are currently subscribed to e-gold-list as: [email protected] To unsubscribe send a blank email to [EMAIL PROTECTED] http://www.e-gold.com/stats.html lets you observe the e-gold system's activity now!
